Council paying $420,000 interest a week
Wellington ratepayers are paying more than $420,000 in interest on borrowings every week - or $5.57 per ratepayer.
"It's a huge amount of money we're having to fund before we do anything else," councillor Bryan Pepperell said.
The city council is wrestling with big financial problems and laying off staff as it tries to trim costs.
Budgets for the next decade, set to be formally adopted by the council next week, include cumulative interest payments of $280 million - $22m next year, increasing to $34.2m in 2012-22.
That equates to $423,230 a week being spent on interest next year - or about $5.57 per ratepayer.
The soaring interest payments come as the council looks set to breach self- imposed borrowing limits.
But the borrowing is being defended as the most equitable solution, and necessary to meet earthquake- strengthening bills.
The council said last year that it was facing tough economic times with looming earthquake-strengthening and leaky-building bills set to stretch the coffers.
Mr Pepperell yesterday criticised the debt levels, saying the situation was ballooning out of control. Given the global economic environment, the council had to start making tough decisions to live within its means, he said.
In 2000, the council's interest payments of $5.3m a year had made front- page headlines. But now the city was paying four times that amount, Mr Pepperell said. He urged councillors to start saying no to projects, such as $4m for a temporary town hall venue, which councillors will debate today.
"What happens with ordinary households in these situations? If they don't live within the rules that you don't spend more than you earn they start to get into all sorts of trouble."
But Mayor Celia Wade-Brown, the council's finance portfolio leader, said borrowing was the most equitable way to cover necessary infrastructure spending. "Prudent borrowing is the most cost-effective and equitable way to fund investments and assets as it spreads the costs over all the generations who will benefit from it and makes it affordable for today's ratepayers."
Earthquake-strengthening work that had to be carried out meant borrowings had increased beyond targets, she said.
In the first two triennium - periods of three years - new borrowing is budgeted at $71m and $80m against a target of $60m. In the next triennium it drops back to $59m.
Ms Wade-Brown said the council's new financial sustainability working group would focus on ways to cut spending to reduce debt levels ahead of next year's annual plan.
- © Fairfax NZ News
Do you hold a driver's licence?Related story: Driving test pass rates drop